Rethinking Fraud Regulation by Rethinking the Health Care System

Abstract

Many participants in the conference Rethinking Regulation in an Era of Reform pointed to health care fraud regulations’ heavy compliance burdens as a reason to rethink the regulatory regime. This Essay argues that some of the regulatory regime’s most significant costs can be attributed to its indirect approach to controlling health care fraud. The challenges of monitoring the necessity and quality of care have led us to try to prevent fraud through regulations of provider relationships; the broad sweep of these indirect regulations leads to high costs in the form of cost-reducing and quality-enhancing innovations forgone. One way to reduce these costs is through regulatory waivers or exceptions. Ultimately, however, the best approach may be to reform the health care delivery system as a whole. By creating information and payment systems that allow for a more direct focus on the cost and quality goals at the heart of the fraud regulatory regime, health care reform can reduce the need for broad, complex, and indirect regulatory approaches that inevitably have unintended consequences.